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Prenuptial agreements are becoming increasingly popular as a means of creating financial harmony in marriages. They help solidify the relationship by providing both parties with a solid understanding of each other's assets, debts, and future financial wishes. The following information discusses key considerations when completing this agreement.

Separate and Shared Property

Defining what property is considered "separate property" and what property is considered "shared property" is one of the central features of any prenuptial agreement. Shared property is any property in which the spouses have signed documentation reflecting their clear intention to share ownership or any property purchased using joint funds. Each party will receive an interest in property purchased using joint funds (funds from both spouses) in proportion to their contribution.

Note that the parties may always change the amount of their ownership interests in shared property or reclassify separate property as shared property (and vice versa) through a written agreement. In the event of divorce, shared property will be divided, typically by either selling the property and dividing the proceeds or by one spouse keeping the property and paying the other spouse half the value.

Enforcing the Agreement

It is important to realize that courts are not required to follow every term in a prenuptial agreement. For instance, courts in some states are not necessarily required to follow provisions related to spousal support. Divorce and family courts must first determine which provisions of the spouses' prenuptial agreement will in fact be upheld. However, by using a prenuptial agreement the spouses greatly improve their odds of having their original wishes carried out in the event the marriage ends by divorce, annulment, death of a spouse, or otherwise. It is recommended that each spouse consults their own independent counsel regarding their rights and obligations under this agreement.

Full Disclosure

It is also very important that both spouses be completely thorough in disclosing all assets, debts, and income sources in the document. Failing to do this can result in the agreement being invalidated if it is ever litigated in court.

Dispute Resolution

It is recommended that you include a mediation and/or arbitration provision when prompted. This will require disputes to be settled through mediation or binding arbitration and avoid the time and expense of going through the formal court system.

Last Will and Testaments

A prenuptial agreement is not a replacement for having a last will and testament. Furthermore, nothing in this agreement prevents the parties from naming each other as beneficiaries in their wills, trusts, or retirement plans.

State Requirements

State law normally requires both spouses to have at least a reasonable amount of time from the time they first receive the prenuptial agreement to review it and seek any legal or financial counsel before signing. It is recommended that the spouses wait at least one week before signing to ensure that the agreement will be enforceable.

California law requires that both spouses have at least one full week from the time they first receive the prenuptial agreement to review it and seek any legal or financial counsel before signing.

Executing Your Agreement

In order to make sure your agreement is legally valid, you need to ensure that it is properly executed. When the parties are ready to sign, they should be sure to initial at the bottom of every page of the agreement in order to show that each page was read. You should then sign where indicated in the presence of a notary and two witnesses (three witnesses are needed in New Hampshire and Vermont).

Frequently Asked Questions

What is a prenuptial agreement?

A prenuptial agreement is an agreement or contract created by a couple before they are married. This legal document lists the property owned by each person and spells out how the property will be divided if the marriage ends in divorce. Also called a “prenup,” “antenuptial agreement,” or even “prenuptial contract,” this document can be used to protect specific assets or income from division if there is a divorce.

Do you need to be wealthy to get a prenup?

While the idea of a prenuptial agreement may create the impression of a very wealthy person attempting to protect their assets from a future spouse with few assets, anyone can create a prenuptial agreement. Some possible reasons to get a prenuptial agreement beyond wealth include the following:

  • To clarify financial responsibilities before, during, and potentially after marriage
  • To avoid problems or disagreements if you decide to divorce
  • To pass property to specific children or to children from a previous marriage
  • To protect property from the other spouse’s debts or creditors

What should I include in a prenuptial agreement?

Each state has its own provisions for the definition of personal property and jointly owned or community property. A prenuptial agreement allows you to define and protect specific property in the event of a divorce. Without a prenup, a court could decide how to divide your assets instead. The following items can be included in a prenuptial agreement:

  • Protection from your spouse’s debts
  • Provisions for children from previous marriages or relationships
  • Ownership of specific family heirlooms, businesses, property, or inheritances
  • Estate plan protection (you will also need a will designating your wishes)
  • An outline for dividing property if there is a divorce
  • Instructions for determining alimony after divorce (some states allow this, some do not)
  • Your marriage responsibilities

While state laws vary, most states do not allow the following items or issues to be included in a prenuptial agreement:

  • Non-financial relationship issues, including agreements about religion and child rearing
  • Illegal actions or provisions that would be against the law
  • Child support or custody agreements
  • Eliminating one partner’s right to alimony
  • Financial incentives that encourage divorce

Is a prenuptial agreement binding?

It depends on where you live and whether the agreement contains a sunset clause, which allows the prenuptial agreement to only exist for a set period of time. Once that time has passed, the protected property becomes joint property, shared by both parties in most states.